P1 Exam Training Practice Tests (CIMA Management Accounting)]

Question 1

Explain how probability analysis could be used to assess the risk of the evaluated projects.
Select all the true statements.

A. The net present value (NPV) of the project, if all high, low or medium estimates occurred, can be calculated along with the combined probabilities of their occurrence. B. The NPVs of a sample range of possible outcomes and the probability of each NPV can be calculated.
If a small sample is taken the distribution of outcomes can be used to calculate the zero activities deviation of the NPVs and the probability of success of the projects. C. The probabilities can be combined to calculate the expected value of each cash flow element and of the project as a whole D. The company can determine a range of possible outcomes for each of the cash flows in the project, for example, a high, low and medium estimate of each cash flow could be determined.

Correct Answer: A,C,D

Question 2

Which of the following statements is true?

A. Standard costing embraces the philosophy of continual improvement. B. Standard costing is focused on delivering quality products to customers. C. Standard costing is focused on achieving zero defects. D. Standard costing is best suited to a stable environment.

Correct Answer: D

Question 3

The breakeven point in units, in a multiple product context, is calculated using which of the following formulae?

A. Fixed costs / weighted average revenue per unit B. Fixed costs / weighted average contribution per unit C. Fixed costs / weighted average contribution to sales ratio D. Fixed costs / weighted average profit per unit

Correct Answer: B

Question 4

A company is considering the use of Material V in a special order.
The material is used regularly and a sufficient quantity of the material is in inventory.
It could also be sold, at just below the current market price, to a local competitor.
What is the relevant cost of Material V to be used in the special contract?

A. The resale value of the material. B. The replacement cost of the material. C. The historic cost of the material in inventory. D. Nil

Correct Answer: B

Question 5

Which of the following managers is most likely to be responsible for an favourable labour efficiency variance?

A. Production Manager B. Human Resources Manager C. Marketing Manager D. Purchasing Manager

Correct Answer: A

Question 6

Sales volumes reported for the latest period are used by managers as the basis to forecast sales for the forthcoming period. The forecasts are compared with the budgeted sales and plans are adjusted to ensure that the budgeted sales are achieved.
This is an example of:

A. Flexed budgets B. Feedback control C. Feedforward control D. Incremental budgeting

Correct Answer: C

Question 7

Which ONE of the following describes full cost-plus pricing?

A. A method determining the sales price by adding a profit margin onto variable sales costs. B. A method determining the sales price by calculating the full cost of the product and adding a percentage mark-up for profit. C. A method determining the sales price by calculating full production costs and adding a percentage mark-up for profit. D. A method determining the sales price by adding a profit margin onto variable production costs.

Correct Answer: B

Question 8

A company is forecasting its revenue for May and has established that sales will be either high, medium or low. The expected value of sales revenue for May has been calculated as $160,000. The following table includes data which relate to the potential sales in May.
Revenue Probability Expected Value
High $250,000 0.2 C
Medium A 0.5 D
Low $100,000 B $30,000
Place the figures given in to the spaces marked with the letters A, B, C and D, to complete the above table.

Correct Answer:

Question 9

The budgeted production of product G for the period was 300 units. At the end of the period it was discovered that the standard hourly rate for labour should have been higher than that originally planned. Actual production was 450 units.
The labour rate planning variance would be calculated as:

A. The revised standard cost of 450 units compared with the original standard cost of 300 units B. The revised standard cost of 450 units compared with the original standard cost of 450 units C. The revised standard cost of 300 units compared with the original standard cost of 450 units D. The revised standard cost of 300 units compared with the orginal standard cost of 300 units

Correct Answer: B

Question 10

Company LGF seeks to maximize profits and has a 'risk seeker' attitude when making decisions. The company has to choose between mutually exclusive projects. A range of possible profit outcomes has been estimated for each project along with their associated probabilities.
Company LGF would choose the project with the:

A. Best possible outcome irrespective of the standard deviation. B. Highest standard deviation irrespective of the expected value. C. Highest expected value irrespective of the standard deviation. D. Highest standard deviation irrespective of the best possible outcome.

Correct Answer: A

CIMA Management Accounting - P1 Exam Practice Test